(MENAFN- ProactiveInvestors)
In early March I made the case that there’s no greater vote of confidence in a company’s growth prospects than when its top officers put some skin in the game and buy their own company stock. Among the examples I used were Warren Buffett who owns millions of shares in ; Elon Musk who purchased over $100 million worth of Tesla stock in 2013; and myself the largest shareholder of U.S. Global Investors.
Another example of how bullish an executive is on his own company is when he chooses to forego a base salary entirely and instead be compensated in company stock.
The most recent chief executive officer to receive such compensation is American Airline’s Doug Parker.
In a letter to employees Parker wrote:
Going forward I have asked our Board to restructure my compensation such that I will no longer receive a base salary or an annual bonus. Instead all of my primary compensation will be paid in AAL stock. This stock will have to be earned over time and will also have to be earned by performance. I believe this is the right way for my compensation to be set—at risk based entirely on the results achieved and in the same currency that our shareholders receive.
Parker has such confidence in his own company and the industry in general that he’s willing to place a huge portion of his financial security in its hands. This along with American’s recent addition to the S&P 500 Index should make investors’ ears perk up.
He’s not the only CEO who’s switched to stock.
Fellow airline executive Maurice J. Gallagher Jr. of Allegiant Air has also passed on cash receiving a little over half a million dollars in stock and options in 2013 alone.
click to enlarge
The late great Steve Jobs was famously paid $1 a year to serve as CEO of —which we own in our
All American Equity Fund (GTBFX) and Holmes Macro Trends Fund (MEGAX)—taking his real payment in company shares. In February 2011 a few months before his death it was reported that Jobs owned about 5.5 million shares in stock which at the time was worth a little over $2 billion.
Another notable example is Larry Ellison co-founder and former CEO of computer technology company also held in GBTFX. In 2013 Ellison was the most highly compensated CEO out of the 300 who were featured in the Wall Street Journal/Hay group CEO Compensation Study. During his final full year of work at he received $67.3 million—nearly all of it in stock options.
Stock has been steadily growing in importance as a form of compensation for the most successful CEOs. Between 2009 and 2013 performance stock for those leading S&P 1500 Index companies rose 52 percent the largest increase of any other type of payment. Compared to all other methods in fact performance stock is now the most-preferred according to executive compensation consultancy firm Equilar.
click to enlarge
Stock isn’t just good for executives; it’s also good for shareholders.
In a 2010 study piece that appeared in the NYU Journal of Law & Business Villanova University Business Law Professor Richard A. Booth writes that “stock options are indeed the best form of incentive compensation yet devised” for CEOs. His reasoning: “[I]t is the supposed duty of the directors and officers to maximize stockholder value. In practice there are few situations in which that duty is enforced as a matter of law. Options fill the gap.”
Although options are a specific type of security giving the holder the right to buy or sell shares at a later date they’re used here as a proxy for the broader argument that stock helps executives better align their interests with shareholders’.
Despite Greece Investors Still Bullish on Europe
You might have noticed that Greece has been in the headlines a lot lately.
Many global investors are anxious to see how the drama unfolds as the beleaguered Mediterranean country strapped for cash is staring down billions of euros in upcoming bailout loan repayments not to mention salaries and pensions. On May 12 Greece will owe the International Monetary Fund (IMF) 0.8 billion euros and between the end of July and beginning of August 7 billion euros in bond payments become due to the European Central Bank (ECB) according to Wood & Company.
Below you can see which countries would be impacted the most were Greece to default on its obligations. Although Germany holds the greatest amount of Greek debt—over 84 billion euros’ worth—Slovenia would be hurt the worst as 4 percent of its GDP is tied up in the country’s debt.
click to enlarge
Rightfully so investors are wondering about the implications of a so-called “Grexit” from the eurozone. We don’t expect this to happen as it would be too great of an economic political and psychological blow to Greece. The IMF takes the same position. To be clear the country is indeed running out of cash and it won’t be able to pay its pensioners and creditors without a deal. Negotiation talks stalled this past weekend but we’re optimistic that a deal can be struck.
Despite all of the negative press global investors including us are increasingly bullish on both Greece and the eurozone in general. We closely monitor technical indicators such as credit default swap (CDS) spreads moving averages and money flow and we’ve seen some promising market moves lately. For instance Greek banks’ five-day moving average just crossed above both the 20- and 60-day moving averages.
So far this year investors have added $223 million to a Greek exchange-traded fund (ETF) with short interest on the product falling to its lowest level since April 2013.
Among 1280 Bloomberg subscribers 35 percent recently singled out the eurozone as the one market that will offer the best investment opportunities over the next year an increase of 16 percentage points since January.
click to enlarge
This is all good news for our Emerging Europe Fund (EUROX). We recently added to our Greek position and are now equal-weighted with its benchmark the MSCI EM Europe 10/40 Index.
To get a better handle on what’s happening in Greece check out Visual Capitalist’s infographic on the subject.
USGI Portfolio Manager Ralph Aldis Named a TopGun
Last week we learned that Ralph Aldis portfolio manager of our Gold and Precious Metals Fund (USERX) and World Precious Minerals Fund (UNWPX) was voted into the American Society of TopGun Investment Minds in the U.S. Metals and Mining category by capital markets performance measurement firm Brendan Wood International.
According to the firm’s press release this honor recognizes investors considered to be “optimal leaders of thought in the industry during the past year.”
Of course we already knew this about Ralph. As many of you know the past three and a half years have been among some of the most challenging for metals and mining investing. But under Ralph’s expert management skills USERX currently holds four stars overall from Morningstar among 71 Equity Precious Metals funds as of 3/31/2015 based on risk-adjusted returns.
I would be remiss not to recognize all of the support behind Ralph and our other talented portfolio managers. We’re fortunate to have a dedicated team of world-class analysts who often work long hours into the evening researching both macro and micro economic trends and assisting in investment analysis. Ralph’s job would be near-impossible without their tireless efforts.
Congratulations team!
Please consider carefully a fund’s investment objectives risks charges and expenses. For this and other important information obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage Inc.
Past performance does not guarantee future results.
 | Overall/71 |
| | 3-Year/71 |
| | 5-Year/67 |
| | 10-Year/51 |
Morningstar ratings based on risk-adjusted return and number of funds
Category: Equity Precious Metals
Through: 3/31/2015
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.